Hellas: Ship Financing Reaches $53.1 Billion As Local Banks Gain More Market Share

2019 was a year in which Greek shipfinance levels stood still at $53.1bn said Petrofin Bank Research in its latest annual survey. Bank shipfinance for Greek shipping has slowed down its decline further to -0.13% compared to -1.52% during 2018 from -5.62% in 2017 and -8.77% during 2016. Forward commitments to newbuildings increased by 11% showing a strong momentum by year end.

The overall Greek loans (both drawn and committed but undrawn) booked both in Greece and worldwide as of 31/12/2019 fell to $53, 107.8m from $53,176.32 in 2018, $53,994.96 in 2017 and $57,211.35m in 2016. Specifically, Drawn loans are down by -2.38% compared to -1.12% in 2018, -3.69% in 2017 and -5.34% the year before. However, Commitments have shown a large increase of 43.75% compared to a continuous slowdown: -8.8% in 2018, -30.63% in 2017 and -38% in 2016.

The declining / exiting banks were largely counter balanced by the expanding / new entrant banks. Credit Suisse at $7.7bn grew by 10% and held a 14.5% market share. Other growing banks were BNP Paribas, KfW, CIT, as well as Eurobank, Alpha bank, Aegean Baltic bank and Bank of Cyprus. The two main departing banks, Nord LB and DVB, showed large falls. Overall, European banks and especially German banks continued their decline in contrast with the Far Eastern and North American banks which increased market share. The Petrofin Index, which commenced at 100 in 2001 and peaked at 443 in 2008, stood at 321 as of end of last year.

Last year, Greek and Cypriot Banks continued their rise by 1.05%. Furthermore, the sale of some loans also took place during the same period. This process continued by the departing German banks. On the whole, in 2019, Greek and Cypriot banks’ liquidity and capital ratios allowed them to also reduce their loan margins and become more competitive versus other lenders. We note this year the addition of Astrobank in Cyprus. We also saw the number of banks lending to Greek owners increase to 55. Interestingly, in all 10 largest banks there are no Far Eastern banks, as there has been a shift in the Far East away from bank finance and towards leasing, often by the large banks’ leasing subsidiaries. Newbuilding related ship finance also grew last year but syndications declined reflecting difficult banking conditions. As the Greek fleet grew both in DWT terms as well as in value, the static shipfinance totals emphasize the increasing role played by leasing and alternative finance providers. Overall, 2019 was a year of adjustment by many banks reflecting their individual corporate and shipping policies.

Commenting on the outlook of the shipfinancing market, Petrofin Bank Research said that “The main event this year has undoubtedly been the Covid-19 pandemic. This has increasingly adversely affected the global economy as countries went into lock down resulting in an estimated sharp global economic contraction of approximately 6%. China, who bore early the brunt of the infection and the lockdown, had begun to stabilise and recover by the time the western world and other Pacific countries were hit. As international trade slowed down, vessels had to face increasingly stringent quarantine and other restrictions affecting their crewing, supplies, repairs, spare parts, drydockings , ballast water treatment fittings, scrubber retrofits and movements. All the above have hit shipping hard”.

Dry bulk demand suffered as did the container, car carrier, offshore and other sectors. Charter rates and utilisation plummeted with rates falling to below operating costs levels. The tanker sector fared better and experienced a good market as a result of the drastic fall in oil prices with vessels being used for storage as the industry faced a terminal capacity problem. Still, the heydays did not last long and tankers too now suffer by the pandemic restrictions.

“The above events and developments had a strong impact on banks and non-bank lenders. As the global economy and international trade entered into unchartered territory, confidence amongst both banks and owners fell. Most banks staff ‘worked from home’ and marketing and meetings were carried out remotely. The rate of loan requests and the loan throughput by banks fell as credit and risk departments by banks were hard put to support fresh lending at a time of such crisis and uncertainty and sought lending only to the strongest clients and credits often on stringent terms. Loan margins started to rise as perceived shipping risk rose and as banks started to face loan restructure requests from hard pressed clients”, Petrofin said.

It added that “It is noticeable that Chinese lending and leasing also came to an abrupt halt for non-Chinese business. This was not only due to the shipping crisis but also due to the Chinese heavy exposure to other hard hit sectors such as aviation. An additional factor was the lack of US Dollar funding for Chinese leasing companies who also faced higher funding costs that could not be passed on to their clients. Some banks, Greek banks in particular, managed to continue lending to their stronger clients. At a time of rising loan margins internationally, Greek banks were able to secure liquidity at a reduced cost due to ECB policy, lower deposit costs the enhanced credit status of Greece and this enabled them to reduce their margins to competitive levels with other non-Greek lenders. Greek banks perceived the pandemic as an opportunity to enhance their position with Greek owners who faced limited finance possibilities.”

Meanwhile, “loan demand for newbuildings has slowed down in line with the declining order book with bank finance becoming harder and costlier. Alternative finance during this period remained active and often represented the only available source of finance. Funds too drove up their margins to higher levels offsetting this by long maturity loans coupled with moratoria where needed”.

Petrofin added that “it is difficult to predict when the Greek ship finance market shall recover to pre pandemic levels. Thus far we are not aware of any fresh banks entering shipfinance nor of any existing banks leaving the market. However, the effects of the pandemic crisis are still being worked through the banking system. It is expected that Chinese ship finance and leasing shall return in the second half of 2020 but not at the high levels of 2019. Further lending by Japanese banks and lenders to Greek owners is anticipated later in 2020. It should be remembered that banks still face strict capital ratio requirements and difficulties to raise additional capital via the public markets. These factors restrict bank lending as a whole and ship finance accordingly. Chinese lending is supported by State liquidity support packages but these are aimed at boosting domestic business and not international lending unless linked to Chinese newbuildings. The US and other public markets have had a rollercoaster ride with shipping stocks particularly hard hit. Investor appetite has waned and will need time to be boosted. In Norway private investment and new bonds flow slowed down but already there is some interest developing for dry bulk investments and companies”.

“For the tanker and offshore markets, the price of oil, production cut backs and oil exploration will determine a possible recovery in 2021. As the general economy recovers, the container sector is expected to recover too but it is doubtful if it shall surpass 2019 levels. There are also uncertainties associated with medical breakthroughs and a possible Covid-19 vaccine which, if successful, would reduce the risks of a second wave of the pandemic returning in the fall and winter of 2020. Another important factor that will affect the future outlook of ship finance is the development of environmental regulation. Recently, several financial institutions have expressed commitment to engage in more sustainable lending and participate in ambitious environmental lending practices (e.g. the Poseidon Principles, see Petrofin Research © at http://www.petrofin.gr under Research, Bankers’ Surveys, 2020). It remains to be seen whether the Covid-19 pandemic will slow down this trend or, notwithstanding the crisis, lending will become more environmentally friendly, thus significantly altering the ship finance landscape in the years to come. The enormous US, EU, Japanese and other liquidity expansion packages are expected to accelerate demand later in 2020 and in 2021. The sums involved are unprecedented and their overall effect untested at this scale. However, the swiftness of the response by Central banks and states in fighting recession will be a notable feature of this pandemic”, Petrofin Bank Research concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide



Source link